Levin sees conference on tax extenders bill

Rep.
Sandy Levin (D-Mich.), the acting chairman of the House Ways and Means
Committee, said a House-Senate conference might be needed on the $138 billion
tax extenders bill being debated in the Senate.

One
reason would be differences between the House and Senate over how the
legislation should be paid for, Levin said Tuesday.

The
Senate bill is partially paid for, but uses offsets included in President
Obama’s health care proposal. Since offsets can’t be used in two bills, that’s
a problem.

Levin
plans to meet with Ways and Means members Wednesday morning to discuss how to
proceed with the Senate extender bill.

Levin
has championed an offset that taxes investment compensation paid to hedge fund
managers known as as ordinary income. “Carried interest” is nowtaxed as capital
gains, which hovers around 15 percent. Levin’s proposal would subject carried
interest to rates that go as high as 35 percent.

But
key senators have opposed the change, and Levin said he would not hold up the
tax package over the issue.

Aside
from resuscitating $30 billion in tax breaks aimed at businesses and
individuals, the Senate bill extends jobless benefits through 2010, prevents a
cut in Medicare reimbursement rates to doctors and provides Medicare funding to
states.

The
original “black liquor” loophole expired in December, but late last year Rep.
Chris Van Hollen (D-Md.) expanded upon the original provision by restricting
the paper industry from capitalizing on cellulosic biofuel tax credits, which
past estimates say could raise $24 billion over 10 years.

Obama
and Senate proposals also would codify what constitutes an abusive tax shelter,
known as the “economic substance doctrine,” which could raise as much as $10
billion over 10 years.

Courts
have used the doctrine to determine whether a tax shelter was created for
legitimate business reasons or solely devised to avoid paying taxes. But
since the doctrine was not in law, courts had considerable leeway in
determining the legality of a tax shelter.

Wednesday’s
Ways and Means meeting will also examine a small business tax proposal that
temporarily allows certain companies to no longer pay capital gains taxes.
Similar efforts have begun in the Senate as well. Levin hopes to mark the bill
up in his committee next week.